Statement of Marybeth Peters
The Register of Copyrights
before the
Committee on the Judiciary

United States Senate
106th Congress, 1st Session

May 25, 1999

Copyright and Digital Distance Education

Over the past five years, the application of copyright law to distance education using
digital technologies has become the subject of public debate and attention in the United
States. In the Digital Millennium Copyright Act of 1998 (DMCA), Congress charged the
Copyright Office with responsibility to study the issue and report back with
recommendations within six months. After an intensive process of identifying stakeholders,
holding public hearings, soliciting comments, conducting research, and consulting with
experts in various fields, the Office has issued this Report.

Part I of the Report gives an overview of the nature of distance education today. Part
II describes current licensing practices in digital distance education, including problems
and future trends. Part III describes the status of technologies relating to the delivery
and protection of distance education materials. Part IV analyzes the application of
current copyright law to digital distance education activities. Part V discusses prior
initiatives addressing copyright and digital distance education. Part VI examines the
question of whether the law should be changed, first summarizing the views of interested
parties and then providing the Copyright Office's analysis and recommendations.

I. The Nature of Distance Education Today

Distance education in the United States today is a vibrant and burgeoning field.
Although it is far from new, digital technologies have fostered a rapid expansion in
recent years, as well as a change in profile. The technologies used in distance education,
the populations served, the institutions offering such programs, and the partnerships that
have emerged differ in nature and scale from earlier models.

The most fundamental definition of distance education is a form of education in which
students are separated from their instructors by time and/or space. Distance education is
utilized in some form at every level of the educational spectrum, with the most extensive
use in higher education. An individual course may contain both classroom and distance
education components. Digital technology is used extensively for varied purposes and in
varied ways, depending on the intended audience for the course, and the availability and
cost of the technology. The capabilities of the new technologies have made possible a more
interactive experience that more closely parallels face-to-face teaching--in effect
creating a virtual classroom. They have also made distance education courses more
convenient and better suited to the needs of different students, including by providing
the benefits of both synchronous and asynchronous methods.

Distance education is reaching wider audiences, covering all segments of the
population. The college audience is increasing particularly rapidly, in part due to
responsiveness to the needs of an older, non-traditional student population, as well as
students in other countries. Students also include professionals engaging in professional
development or training, and retirees. The expansion of the field has led to changes among
providers, with courses offered by both nonprofit and for-profit entities, on both a
nonprofit and for-profit basis, and through varieties of partnerships among educational
institutions and corporations. The federal government has been active in promoting the
benefits of distance education, with recent legislation providing funding and recognition
in various forms.

Educational institutions offering distance education draw on library resources in
several ways, including to provide support for online courses and to provide access to
supplemental materials in digital form. Institutions are engaged in adopting copyright
policies, training faculty and staff, and educating students about copyright law. They are
increasingly seeking and obtaining formal accreditation.

II. Licensing of Copyrighted Works

Although substantial licensing activities are taking place today in connection with the
provision of materials to distance education students, so far relatively few licenses are
requested or granted for digital uses. Most licensing relates to supplemental materials in
analog form, or, increasingly, in digital form; the least common type of licensing is for
digital uses of copyrighted works incorporated into the class itself. Most of the works
licensed for digital use are textual materials; licenses for other types of content are
much less frequent. As an alternative to seeking a license, an educational institution may
avoid the use of preexisting copyrighted works in distance education courses, or may rely
on exemptions in the copyright law. There is wide diversity in licensing procedures among
educational institutions and copyright owners. In general, the more resources devoted to
licensing, and the more centralized the responsibility, the more efficient and successful
the process.

Many educational institutions describe having experienced recurrent problems with
licensing for digital distance education, primarily involving difficulty locating the
copyright owner, inability to obtain a timely response, or unreasonable prices or other
terms. The problems are reported to be most serious with respect to journal articles and
audiovisual works. They appear to be exacerbated in the digital context, which may be
explained in part by the perception of copyright owners that the risks of unauthorized
dissemination are greater, and in part by the elements of novelty and unfamiliarity.

A number of trends may facilitate the development of more effective digital licensing
in the near future, including advances in technology used to protect works, the use of
electronic copyright management information, and online licensing systems. New collective
initiatives should also ease the licensing process for many types of uses. As digital uses
become more common and familiar, copyright owners are becoming more flexible. It is
difficult to predict the extent to which licensing problems will subside or how long the
improvement will take, but given the current state of development of these trends, a more
definitive evaluation will be possible in the next few years.

III. Technologies Involved in Digital Distance Education

Technology that facilitates licensing includes the ability to attach information to a
work in digital format, and online rights and permissions services supporting a range of
license and delivery functions. A number of different delivery technologies are used in
distance education today, including traditional media used to carry digital information,
such as digital television broadcasts or videoconferencing. These may be used in
combination with digital network technology, such as computer connections between students
and instructors.

The computer is the most versatile of distance education instruments, since it can
perform the same function as a television or telephone, but also provide more
interactivity, deliver more content, and support more comprehensive services. Computers
can be used to transmit texts and graphics, connect users in a variety of real-time and
asynchronous dialogues, deliver messages between users, and receive both audio and video
transmissions.

There is no "typical" digital distance education course. Instructors
sometimes build courses from scratch, and sometimes customize templates provided by
commercial software. They may combine any or all of the technological tools available
today, including e-mail, threaded discussions, chat rooms, whiteboard programs, shared
applications, streaming video or audio, video or audio files, course management
infrastructure, links to websites, and interactive CD-ROMs and DVD-ROMs. In addition,
programs for self-paced independent learning may be obtained from commercial vendors or
through an educational institution.

The need to provide technological security for copyrighted works in the digital
environment has been recognized in all sectors, not just for distance education.
Technology companies and content providers are working to develop commercially viable
protection technologies, and industries are collaborating to develop standards. Some
technologies limit access to works; others prevent or detect uses of works after access.
Each method varies in its cost and degree of security; although many are highly effective,
none provides absolute certainty. The goal is to provide a high enough level of protection
that the cost of circumvention outweighs the value of access to the material protected.

Educational organizations can, and commonly do, limit access to students enrolled in a
particular class or institution through several different methods used separately or in
combination: password protection, firewalls, screening for IP addresses or domain names,
hardware connections, encryption, or using CD-ROMs as a delivery mechanism.

After access has been gained, however, material is available to students for further
use, including downloading, or electronic distribution. Technologies that address such
downstream uses do exist today, with several on the market, others expected to be released
very soon, and others projected for release in the next year. Most, but not all, are
designed to handle a single type of content. The most effective are secure
container/proprietary viewer technologies, which allow copyright owners to set rules for
the use of their works, which are then attached to all digital copies, and prevent anyone
from making a use that is not in accordance with the rules. For example, students could be
allowed to view the work or print a single copy, but not to save it to disk or distribute
it to others electronically. Streaming formats, which do not facilitate the making of
copies, and the use of low resolution digital copies, also offer some degree of protection
against redistribution.

Technologies for embedding information in digital works to identify and track usage are
also in development and use, with the practice of digital watermarking the most effective.
Using commercially available software or services, these identifiers can be used as a
search object to find unauthorized copies of some types of works on the World Wide Web.

Significant developments are occurring in all of these areas, and a few generalizations
can be made. More efficient licensing mechanisms will become more widespread, and delivery
systems will become more efficient, sophisticated and interoperable. Developments in
protecting content are harder to predict. In the near future it will be technically
possible to protect works against both unauthorized access and dissemination with a high
degree of effectiveness. Because it remains to be seen whether technologies to prevent
downstream uses will gain widespread market acceptance, the extent to which they will be
available in practical form for use in digital distance education at any given point in
time is unclear.

IV. Application of Copyright Law to Distance Education

Different copyright rights are implicated by different educational activities,
depending in part on the technologies used. When a performance or display of a work is
accomplished by means of a digital network transmission, temporary RAM copies are made in
the computers through which the material passes, by virtue of the technological process.
As a result, not only the rights of public performance or display are implicated, but also
the rights of reproduction and/or distribution. This does not mean that the use is
necessarily an infringement. Permission to use the work could be granted by the copyright
owner, either through an express license or implied from the circumstances. If not, the
use may fall within one of the various exemptions in the Copyright Act.

Three exemptions together largely define the scope of permitted uses for digital
distance education: two specific instructional exemptions in section 110, and the fair use
doctrine of section 107. Sections 110(1) and (2) together were intended to cover all of
the methods by which performances or displays in the course of systematic instruction take
place. Section 110(1) exempts the performance or display of any work in the course of
face-to-face teaching activities. Section 110(2) covers the forms of distance education
existing when the statute was enacted in 1976, exempting certain performances or displays
in the course of instructional broadcasting. Both subsections contain a number of
limitations and restrictions. In particular, the section 110(2) exemption from the
performance right applies only to nondramatic literary and musical works (although the
display right exemption applies to all categories of works). Section 110(2) also contains
limitations on the nature and content of the transmission, and the identity and location
of the recipients. The performance or display must be made as a regular part of systematic
instructional activity by a nonprofit educational institution or governmental body; it
must be directly related and of material assistance to the teaching content; and it must
be made primarily for reception in classrooms or places of instruction, or to persons
whose disabilities or other special circumstances prevent their attendance in classrooms,
or to government employees.

As written, section 110(2) has only limited application to courses offered over a
digital network. Because it exempts only acts of performance or display, it would not
authorize the acts of reproduction or distribution involved in this type of digital
transmission. In addition, students who choose to take a distance course without special
circumstances that prevent their attendance in classrooms may not qualify as eligible
recipients.

Fair use is the broadest and most general limitation on the exclusive rights of
copyright owners, and can exempt distance education uses not covered by the specific
instructional exemptions. It is flexible and technology-neutral, and continues to be a
critical exemption for educational users in the digital world. It requires courts to
examine all the facts and circumstances, weighing four nonexclusive statutory factors.
While there are not yet any cases addressing the application of fair use to digital
distance education, a court's analysis will depend on elements such as the subject matter
of the course, the nature of the educational institution, the ways in which the instructor
uses the material, and the kinds and amounts of materials used. Guidelines have in the
past been negotiated among interested parties to provide greater certainty as to how fair
use applies to education; such guidelines for certain analog uses were included in
legislative history around the time of enactment of the Copyright Act.

Other exemptions in the Copyright Act may exempt some distance education uses in
limited circumstances, but do not significantly expand the scope of permitted
instructional uses in a digital environment. These include the ephemeral recordings
exemption in section 112, the limitations on exclusive rights in sound recordings in
section 114, and the exemption for certain secondary transmissions in section 111.
Compulsory licenses could permit distance educators to use some works in limited ways, but
are not likely to be much used.

Two titles of the DMCA are also relevant, one providing limitations on the liability of
online service providers and the other establishing new technological adjuncts to
copyright protection. While these provisions do not affect the scope of permitted digital
distance education uses, they add a degree of security for both educational institutions
and copyright owners disseminating and licensing material in the digital environment, and
may relate to exemptions in various respects. New section 512 of the Copyright Act
provides greater certainty that educational institutions providing network access for
faculty, staff, and students will not, merely by doing so, become liable for infringing
material transmitted over the network. New Chapter 12 contains a prohibition against
various forms of circumvention of technological measures used by copyright owners to
protect their works, and a provision protecting the integrity of copyright management
information.

The international context raises two separate issues: treaty obligations and the impact
of any amendments abroad. The major treaties that impose obligations on the United States
with respect to copyright are the Berne Convention and the TRIPs Agreement. Both contain
rules governing the permissibility of exceptions to copyright owners' rights. Any new or
amended exemption for distance education should be drafted to be compatible with these
standards. In addition, the enactment of any new exemption will have an impact abroad,
primarily due to doctrines of choice of law. When an educational institution in the United
States transmits courses to students in other countries, it is unclear whether U.S. law
will apply to such transmissions, or the law of the country where the transmission is
received, making it difficult for educators to determine what uses of works are
permissible. Other countries are also making or considering amendments to their copyright
laws to address digital distance education.

Two different initiatives begun in 1994 sought to develop guidelines interpreting the
application of fair use to educational uses through digital technology. One group,
initiated by the Consortium of College and University Media Centers (CCUMC) and the Agency
for Instructional Technology, issued a set of guidelines in 1996 addressing the use of
portions of copyrighted works in educational multimedia projects created by educators or
students as part of systematic learning activity at nonprofit educational institutions.
The other group, established by the Conference on Fair Use (CONFU) convened by the
Administration's Information Infrastructure Task Force, prepared draft guidelines relating
to the performance and display of copyrighted works in distance learning classes of
nonprofit educational institutions, not including asynchronous delivery over computer
networks. CONFU considered both sets of guidelines as proposals, but did not formally
adopt them. A number of organizations and companies, however, have endorsed one or both
sets of guidelines, or use them as a reference.

In 1997, the issue of copyright and digital distance education was raised in Congress
by the introduction of bills in the House and Senate proposing an amendment to section
110(2). The amendment would have clarified that the exemption covered digital
transmissions, and would have broadened its scope, removing the limitation on categories
of works covered, adding the right of distribution, and removing the requirement that the
transmission be made primarily for reception in classrooms and by people unable to attend
classrooms. No floor action was taken on these bills, but they became the subject of
discussion in the Senate during consideration of the WIPO Copyright and Performances and
Phonograms Treaty Implementation Act. After intensive discussions among interested
parties, it became clear that many complex and interrelated issues were involved that
could not be given adequate consideration in the time available. Congress therefore
provided for a longer-term study in section 403 of the DMCA.

VI. Should Current Law Be Changed?

A. The Views of The Parties

The educational community (including both educators and academic libraries) believes
that a change in the law is required to optimize the quality and availability of forms of
distance education that take full advantage of today's technological capabilities. Members
of this community argue that fair use is uncertain in its application to the digital
environment, and that the exemptions in section 110 are outmoded and do not extend to the
full range of activities involved in digital distance education. They report that
licensing for such uses is not working well, and therefore does not offer a satisfactory
alternative. Some educators also note that distance education is already an expensive
proposition, involving substantial start-up and maintenance costs, and warn that adding
the cost of licensing fees for copyrighted materials could make it prohibitive.

Copyright owners, on the other hand, do not believe statutory amendment is necessary or
advisable, pointing out that digital distance education is flourishing under current law.
They see the fair use doctrine as strong and healthy, and are concerned that expanding the
section 110 exemptions would harm both their primary and secondary markets. They assert
that more efficient licensing systems are developing, and that the reported difficulties
in obtaining permissions will ease with time and experience. Finally, they argue that
educators who wish to use preexisting copyrighted content in their courses should regard
licensing fees as one of the costs of distance education, comparable to the purchase of
the necessary hardware and software.

There is virtual unanimity that the doctrine of fair use is fully applicable to uses of
copyrighted works in the digital environment, including in distance education. (This does
not mean that all agree as to which digital distance education activities would qualify as
fair.) As to the role of guidelines, the messages were mixed. Many copyright owners
recommend pursuing the development of guidelines regarding the fair use of copyrighted
materials in digital distance education, and suggest that further discussion could be
productive in achieving greater mutual understanding and certainty. Educational and
library groups were less positive, expressing varying views. Some educators see guidelines
as valuable guides to decisionmaking; other participants are critical of the concept or
doubtful about the efficacy of any results.

As to the specific instructional exemptions, copyright owners argue that section 110(2)
should not be changed. They are concerned that a broadening of the exemption would result
in the loss of opportunities to license works for use in digital distance education -- a
new, growing, and potentially lucrative market. They urge that Congress not foreclose the
potential market by legislating prematurely or overbroadly.

The other major concern of copyright owners is the increased risk of unauthorized
downstream uses of their works posed by digital technology. When works are distributed in
digital form, once a student obtains access, it is easy to further distribute multiple
copies to acquaintances around the world. Depending on the type of work involved and the
amount used, the result could be a significant impact on the market for sales of copies.

Most educational and library groups, in contrast, support a broadening of
section 110(2). They view fair use alone as either not clear enough or not extensive
enough in its application. Their primary goals are to avoid discrimination against remote
site students in their educational experience vis-a-vis on-site students; to avoid
discrimination against new technologies vis-a-vis old ones; and to avoid the difficulties
in licensing that many describe having experienced. In general, the educational community
seeks the following changes: (1) elimination of the concept of the physical classroom as a
limitation on the availability of the exemption; (2) coverage of rights in addition to
performance and display, at least to the extent necessary to permit digital transmissions;
and (3) expansion of the categories of works covered, by broadening the performance right
exemption to apply to works other than nondramatic literary and musical works. Some would
go further, advocating an exemption that allows educators to do anything by means of
digital transmission that they can do in the classroom under section 110(1).
Libraries in particular also seek exemptions for additional activities, stressing the
importance of being able to give access to electronic reserves and other resource
materials in order to provide a high-quality educational experience for students at remote
sites.

As to the risks involved, educational institutions are willing to take steps to
safeguard the security of the materials they disseminate. In fact, they point out that
they already make such efforts; the use of password protection and other access controls
is widespread. Many also require compliance with copyright policies and inform students,
faculty and staff about the law. Finally, educators believe that licensing should continue
to play some role in distance education.

B. Analysis And Recommendations

The analysis of whether the law should be changed is complicated by the context: a time
of rapid development in both technologies and markets. While such rapid development is a
hallmark of the digital age, in the area of distance education we are at a particularly
crucial point in time. Sophisticated technologies capable of protecting content against
unauthorized post-access use are just now in development or coming to market, although it
is not clear when they will be widely available in a convenient and affordable form that
can protect all varieties of works. Meanwhile, licensing systems for digital distance
education are evolving, including online and collective licensing mechanisms, and initial
fears are beginning to ebb.

Many of the concerns on all sides stem from the inability to depend on the effective
functioning of technological protections and licensing mechanisms. If technology were
further along, broadened exemptions could be less dangerous to copyright owners; if
licensing were further evolved, broadened exemptions could be less important for
educators. The technical tools for both exist today; it will be clearer within the next
few years how successfully they can be integrated into the real world of distance
education. Given the timetable of the legislative process, the question is what steps
Congress can and should take in the interim.

Over the course of this study, numerous issues have been raised and discussed. Given
the limited time allotted, the specific mandate for the Register to consider primarily
"the need for an exemption from exclusive rights of copyright owners for distance
education through digital networks," and the origin of that mandate in proposed
amendments to section 110(2), our analysis focuses on the appropriate treatment under
copyright law of materials delivered to students through digital technology in the course
of mediated instruction. We do not address other uses of copyrighted works in the course
of digital distance education, including student use of supplemental or research materials
in digital form; the creation of multimedia works by teachers or students; and the
downloading and retention of materials by students. Such activities, although an important
part of digital distance education, do not involve uses analogous to the performances and
displays addressed in section 110(2).

As a fundamental premise, the Copyright Office believes that emerging markets should be
permitted to develop with minimal government regulation. When changes in technology lead
to the development of new markets for copyrighted works, copyright owners and users should
have the opportunity to establish mutually satisfactory relationships. A certain degree of
growing pains may have to be tolerated in order to give market mechanisms the chance to
evolve in an acceptable direction. At some point, however, existing but dysfunctional
markets may require adjustments in the law. Timing is therefore key.

The desire to let markets evolve does not mean that the law must remain frozen. Where a
statutory provision intended to implement a particular policy is written in such a way
that it becomes obsolete due to changes in technology, the provision may require updating
if that policy is to continue. Doing so may be seen not as preempting a new market, but as
accommodating existing markets that are being tapped by new methods. In the view of the
Copyright Office, section 110(2) represents an example of this phenomenon.

The exemptions in sections 110(1) and (2) embody a policy determination that
performances or displays of copyrighted works in the course of systematic instruction
should be permitted without the need to obtain a license or rely on fair use. The
technological characteristics of digital transmissions have rendered the language of
section 110(2) inapplicable to the most advanced delivery method for systematic
instruction. Without an amendment to accommodate these new technologies, the policy behind
the law will be increasingly diminished.

At the same time, it must be borne in mind that existing law was crafted to embody a
balance of interests between copyright owners and users of works. In order to maintain a
comparable balance, the coverage of an exemption cannot be expanded without considering
the impact of the expansion on markets for copyrighted works. If the law is updated to
address new technology, the risks posed by that technology must be adequately taken into
account.

Updating section 110(2) to allow the same activities to take place using digital
delivery mechanisms, while controlling the risks involved, would continue the basic policy
balance struck in 1976. In our view, such action is advisable.

Other amendments have been suggested that would go further, and entail varying degrees
of change in legislative policy. These include expanding the exemption to cover more
categories of works or additional exclusive rights beyond those necessary for digital
delivery, and otherwise resolving problems experienced in the licensing process. Here, the
elements of timing and burden of proof are critical. From a pedagogical perspective, these
suggested expansions are desirable. From a copyright owner's perspective, they endanger
primary or secondary markets for valuable works. The question should not be whether users
have established a need to expand the exemption, any more than whether copyright
owners have established a need to retain its limits, but rather whether given
current conditions, the policy balance struck in 1976 should be recalibrated in certain
respects.

We conclude that some policy recalibration may be appropriate at this point, relating
primarily to categories of works covered. In other areas, we believe that existing
restrictions should be retained and markets permitted to evolve, subject to further
review. Critical to this conclusion is the continued availability of the fair use doctrine
as a safety valve.

1. Recommendations as to Statutory Language.

In order to accomplish the goal of updating the language and the policy balance of
section 110(2), the Copyright Office offers the following recommendations:

(a) Clarify meaning of "transmission." It should be clarified
through legislative history that the term "transmission" in section 110(2)
covers transmissions by digital means as well as analog.

(b) Expand coverage of rights to extent technologically necessary. Because the
exemption in its current form permits only acts of performance and display, digital
transmissions over computer networks would not be excused. We therefore recommend
expanding the scope of the rights covered, in order to add those needed to accomplish this
type of transmission. The rights of reproduction and/or distribution should not be added
in their entirety, but only to the extent technologically required in order to transmit
the performance or display authorized by the exemption.

(c) Emphasize concept of mediated instruction. An exemption that includes
elements of the reproduction right so as to allow a student to access individual works
asynchronously raises an unintended problem. If an entire work can be viewed on a computer
screen, repeatedly, whenever a student chooses and for an indefinite duration, the
performance or display could conceivably function as a substitute for the purchase of a
copy. In updating section 110(2), it is therefore critical to ensure that the performance
or display is analogous to the type of performance or display that would take place in a
live classroom setting. This might be accomplished by amending paragraph (A) of section
110(2), which requires the performance or display to be "a regular part of . . .
systematic instructional activities," to focus on the concept of mediated
instruction. Additional language could specify that the performance or display must be
made by or at the direction of an instructor to illustrate a point in, or as an integral
part of, the equivalent of a class session in a particular course.

(d) Eliminate requirement of physical classroom. In its current form, section
110(2) requires transmissions to be sent to a classroom or similar place normally devoted
to instruction, or to persons who cannot attend a classroom. The nature of digital
distance education, where the goal is to permit instruction to take place anywhere, makes
this limitation conceptually and practically obsolete. Eliminating the physical classroom
limitation would better reflect today's realities.

At the same time, it is important to retain meaningful limitations on the eligible
recipients; the performances or displays should not be made available to the general
public. We recommend permitting transmissions to be made to students officially enrolled
in the course, regardless of their physical location. Since today's digital and scrambling
technologies allow transmissions to be targeted more precisely, the requirement should be
added that the transmission must be made solely, to the extent technologically feasible,
for reception by the defined class of eligible recipients.

(e) Add new safeguards to counteract new risks. Because the transmission of
works to students in digital form poses greater risks of uncontrolled copying and
distribution, a broadened exemption could cause harm to markets beyond the primary
educational market. It is therefore critical, if section 110(2) is expanded to cover
digital transmissions, that safeguards be incorporated into the statute to minimize these
risks. We recommend including a number of safeguards as conditions on the applicability of
the exemption: First, any transient copies permitted under the exemption should be
retained for no longer than reasonably necessary to complete the transmission. Second,
those seeking to invoke the exemption should be required to institute policies regarding
copyright; to provide informational materials to faculty, students, and relevant staff
members that accurately describe and promote compliance with copyright law; and to provide
notice to students that materials may be subject to copyright protection.

Third, when works are transmitted in digital form, technological measures should be in
place to control unauthorized uses. In order to effectively limit the risks to copyright
owners' markets, these measures should protect against both unauthorized access and
unauthorized dissemination after access has been obtained. The exemption should require
the transmitting institution to apply such measures, described in simple and
technology-neutral language. Because no technology is one hundred percent effective, only
measures that "reasonably" prevent these acts should be required. In addition,
the law should impose an obligation not to intentionally interfere with protections
applied by the copyright owners themselves. If copyrighted works are to be placed on
networks, and exposed to the resulting risks, it is appropriate to condition the
availability of the exemption on the application of adequate technological protections.

(f) Maintain existing standards of eligibility. An educational institution
must be "nonprofit" to be eligible for the exemption in section 110(2). There
was extensive debate over the appropriateness of retaining the "nonprofit"
requirement, and/or adding a requirement of accreditation. In the area of digital distance
education, the lines between for-profit and nonprofit have blurred, and the issue has
arisen as to how to guarantee the bona fides of an entity that is entitled to the
exemption at a time when anyone can transmit educational material over the Internet. The
Copyright Office is not convinced at this point that a change in the law is desirable,
given the policy implications of permitting commercial entities to profit from activities
using copyrighted works without compensating the owners of those works; the potential
inconsistency with other provisions of the Act, including section 110(1), that refer to
"nonprofit educational institutions"; and the DMCA mandate to consult
specifically with nonprofit educational institutions and nonprofit libraries and archives.
This is nevertheless an important and evolving issue that deserves further attention.

(g) Expand categories of works covered. One of the most difficult issues to
resolve is whether to expand the categories of works exempted from the performance right
beyond the current coverage of nondramatic literary and musical works. On the one hand,
pedagogical considerations militate against continuing to limit the types of works
covered. On the other hand, the existing distinctions have been embedded in the law for
more than twenty years, based on the potentially greater market harm to works such as
dramatic works or audiovisual works. The question is why this policy judgment should be
altered now.

The main categories of works that could be affected by an expansion are audiovisual
works, sound recordings, and dramatic literary and musical works. In terms of primary
markets, educational licensing may represent a major source of revenue only for
educational videos. The potential effect on secondary markets, however, remains a serious
concern for all such works. This concern has been exacerbated beyond the threats perceived
in 1976 by the capacities of digital technology. For entertainment products like motion
pictures, transmission could well substitute for students paying to view them elsewhere,
and if digital copies can be made or disseminated, could affect the broader public market.

The considerations are different for sound recordings than for other categories.
Because there was no public performance right for sound recordings when section 110(2) was
enacted in 1976, educators were free to transmit performances of sound recordings to
students (assuming the use of any other work embodied in the sound recording was
authorized by statute or license). When owners of sound recordings were granted a limited
public performance right in 1996, there was no discussion of whether sound recordings
should be added to the coverage of section 110(2). This issue thus represents a new policy
question that has not yet been considered, rather than a potential change in a judgment
already made.

It is the exclusion of audiovisual works, however, about which educators express the
strongest concern, in part due to difficulties in obtaining licenses for digital uses from
motion picture producers. Moreover, as digital distance education uses more multimedia
works, which incorporate audiovisual works and may be considered audiovisual works
themselves, the failure to cover this category may have an increasing impact.

On balance we suggest a compromise. If audiovisual and other works are added, it should
be done in a limited way, with greater restrictions than section 110(2) currently imposes.
Thus, section 110(2) could be amended to allow performances of categories in addition to
nondramatic literary and musical works, but not of entire works. An expanded exemption
should cover only the performance of reasonable and limited portions of these additional
works. It is important to note that under the current language of section 110(2), the
portion performed would have to be the subject of study in the course, rather than mere
entertainment for the students, or unrelated background or transitional material. This
requirement, combined with the limitation on the amount of the work that could be used,
should further serve to limit any impact on primary or secondary markets. It nevertheless
may be advisable to exclude those works that are produced primarily for instructional use.
For such works, unlike entertainment products or materials of a general educational
nature, the exemption could significantly cut into primary markets, impairing incentives
to create.

(h)Require use of lawful copies. If the categories of works covered
by section 110(2) are expanded, we recommend an additional safeguard: requiring the
performance or display to be made from a lawful copy. Such a requirement is already
contained in section 110(1) for the performance or display of an audiovisual work in the
classroom.

(i) Add new ephemeral recording exemption. Finally, in order to allow the
digital distance education that would be permitted under section 110(2) to take place
asynchronously, we recommend adding a new subsection to section 112, the ephemeral
recordings exemption. The new subsection would permit an educator to upload a copyrighted
work onto a server, to be subsequently transmitted under the conditions set out in section
110(2) to students enrolled in her course. The benefit of the new subsection should be
limited to an entity entitled to transmit a performance or display of a work in digital
form under section 110(2). Various limits should be imposed similar to those set out in
other subsections of section 112, including the requirements that any such copy be
retained and used solely by the entity that made it; that no further copies be reproduced
from it (except the transient technologically necessary copies that would be permitted by
section 110(2)); that the copy be used solely for transmissions authorized under section
110(2); and that retention of the copy be limited in time, remaining on the server in a
form accessible to students only for the duration of the course. In addition, the
reproduction should have to be made from a lawful copy. Finally, the entity making the
reproduction should not be permitted to remove technological protections applied by the
copyright owner to prevent subsequent unlawful copying.

2. Clarification of Fair Use.

Because there is confusion and misunderstanding about the fair use doctrine, including
the function of guidelines, we believe it is important for Congress to provide some
clarification. The statutory language of section 107 is technology-neutral, and does not
require amendment. But if any legislative action is taken with regard to distance
education, we recommend that report language explicitly address certain fair use
principles.

First, the legislative history should confirm that the fair use doctrine is
technology-neutral and applies to activities in the digital environment. It might be
useful to provide some examples of digital uses that are likely to qualify as fair. It
should be explained that the lack of established guidelines for any particular type of use
does not mean that fair use is inapplicable. Finally, the relationship of guidelines to
fair use and other statutory defenses should be clarified. The public should understand
that guidelines are intended as a safe harbor, rather than a ceiling on what is permitted.

Although flexibility is a major benefit of the fair use doctrine, the corollary is a
degree of uncertainty. This drawback is exacerbated by the context of new technologies,
where little case law is available. In the analog world, efforts such as the photocopying
and off-air taping guidelines have proved helpful in giving practical guidance for
day-to-day decisionmaking by educators. The Copyright Office believes that additional
discussion among the interested parties of fair use as applied to digital distance
education could be productive in achieving a greater degree of consensus. In the past,
efforts to develop guidelines have been successful where a consistent group of
participants worked within a structure established under the auspices of a government
agency, with some direction provided by Congress.

3. Licensing Issues.

The fact that digital technologies impose new costs on delivering distance education
does not itself justify abandoning or regulating the long-standing licensing system.
Digital distance education entails the use of computer hardware and software, and the
employment of trained support staff, all of which cost money. Digital distance education
may also entail the use of preexisting copyrighted works. This content is at least as
valuable as the infrastructure to deliver it, and represents another cost to be calculated
in the equation.

The critical question here is whether the markets in which distance educators
participate are dysfunctional, and if so, to a degree that calls for a legislative remedy.
While the problems experienced in licensing are not unique to digital distance education,
they are heightened in the digital context due to factors such as fear about increased
risks; lack of certainty as to the scope of pre-digital transfers of rights; and general
unfamiliarity with new uses. Many of these factors should diminish with time and
experience, and there are some indications that this is already happening. In addition,
online and collective licensing for digital uses will increasingly facilitate
transactions. Nevertheless, problems will persist for the foreseeable future, as long as
risks are perceived as high or benefits low.

One of the problems identified by educators has special characteristics that can block
the functioning of the marketplace. Where the owner of the work simply cannot be located,
there is no opportunity to negotiate. Particularly because the problem of such
"orphan works" may become more acute due to longer copyright terms and the
expanded audience for older works made possible by digital technology, we believe that the
time may be ripe for Congressional attention to this issue generally.

We have not otherwise seen sufficient evidence of a need for a legislative solution
moving away from the general free market approach of current law. Given the state of flux
of online licensing systems and technological measures, and the waning influence of the
elements of fear and unfamiliarity, problems of delay and cost may subside to an
acceptable level. At this point in time we recommend giving the market for licensing of
nonexempted uses leeway to evolve and mature. Because the field of digital distance
education is growing so quickly, and effective licensing and technologies may be on the
horizon, we suggest revisiting the issue in a relatively short period of time.

4. International Considerations.

In making these recommendations, the Copyright Office is mindful of the constraints of
U.S. treaty obligations. In our view, the relevant criteria of the Berne Convention and
the TRIPs Agreement are fundamentally in harmony with domestic policy considerations. We
believe that our recommendations are fully consistent with these criteria, and would not
alter the fundamental balance of either section 110(2) or 112, which have been part of
U.S. law for more than twenty years.

The balance struck in U.S. law will have an importance beyond our borders,
both through its potential application abroad and as a model for other countries
examining the issue. Whether a distance education transmission initiated in
one country and sent to a student in another country constitutes an infringement,
falls within a collective or compulsory licensing scheme, or is exempted, will
depend on which country's law a court applies. This means both that the scope
of the exemptions in the U.S. Copyright Act may have an impact on foreign markets
for U.S. works, and that U.S. copyright owners and users have an interest in
the scope of exemptions or statutory licensing rules adopted in foreign laws.